Hedge funds and other speculative traders are positioning for a further rally in the dollar as demand for safe-haven assets intensifies ahead of the US presidential election, according to a report by Bloomberg citing data from The Commodity Futures Trading Commission (CFTC).
CFTC figures reveal approximately $17.8bn in bullish dollar positions as of 29 October, an $8bn increase from the prior week following a shift away from earlier bearish sentiment.
The surge in dollar optimism comes amid a close race between Kamala Harris and Donald Trump, prompting Wall Street to hedge against potential US policy shifts toward protectionism.
“A tighter election increases market uncertainty and benefits the dollar, given its safe haven characteristics,” said Aroop Chatterjee, a strategist at Wells Fargo. Robust US economic data, which could ease pressure on the Federal Reserve to rapidly cut rates, has further bolstered the dollar’s appeal.
On Friday, the dollar rose as volatility in currency markets reached levels not seen since the height of the Covid-19 pandemic in April 2020. One-week implied volatility on the Bloomberg Dollar Spot Index has climbed sharply as the election nears, underscoring the market’s anticipation of potential swings.
“As betting markets shift odds in favour of a Trump presidency, even if polling data is less conclusive, traders are moving to defensive positions — in this case, taking long dollar,” explained Helen Given, a foreign-exchange trader at Monex. She noted that this strategy is likely to hold until markets have greater clarity on either candidate’s trade policies.
Many Wall Street strategists agree that Trump’s proposed tariffs would likely support the dollar in the short term while pressuring currencies such as the Chinese yuan and Mexican peso. However, Trump has previously expressed concerns about the dollar’s strength, leaving some uncertainty about how he would balance these competing priorities.
In contrast, a Harris administration is expected to introduce more stability to US policy, reducing demand for the dollar’s safe-haven status. Wells Fargo’s Chatterjee suggests that a Democratic win, particularly if the party gains control of both the White House and Congress, could lead to increased social spending, potentially weighing down the dollar.
“It seems the market is pricing in a Trump win — or at least hedging against it,” said Win Thin, Global Head of Markets Strategy at Brown Brothers Harriman, who also pointed to weaker economic data globally, which has supported the dollar’s appeal regardless of election outcomes, as the divergence in economic resilience favours the US.
